Insights & News

Christopher Scarpa, Joan Ohlbaum Swirsky and William Pilling Quoted in Ignites

June 16, 2015
Press Clippings
Stradley Ronon Partners Christopher Scarpa, Joan Ohlbaum Swirsky and William Pilling were quoted in an Ignites article, "ICI Seeks IRS Help to Prevent Money Fund Runs," that discusses ICI's concern about runs on institutional prime money market funds whose net asset values waver below $1.00 in the days and months leading up to the compliance dates of the SEC's reform.

In light of this concern, ICI has put in a request to the IRS to permit fund advisors to prop up the net asset values of those funds with capital infusions, but to exempt sponsors from the usual tax treatment of such contributions.

“Reorganizations and liquidations are being planned by some funds as reactions to money fund reform,” writes Joan Ohlbaum Swirsky, counsel at Stradley Ronon, in an e-mail response to questions. “Upcoming transactions give new urgency to dealing with NAV deficits that, in some cases, have lingered since they were incurred during the 2008 financial crisis.”

With mergers of affiliated funds, the fund board must determine that there is no dilution of shareholder value resulting from the reorganization, but that may be harder to do if one of the funds’ NAV has dipped below $1.00, explains Swirsky.

It’s difficult to gauge how many money funds may want to make capital injections. Yet the fact that the ICI has asked for guidance from the IRS on the issue suggests that “there are enough money market funds with this issue that it’s an industry problem,” says William Pilling, a partner at Stradley Ronon who deals with mutual fund tax issues.

The IRS is likely to provide the guidance the ICI seeks, says Christopher Scarpa, also a partner at Stradley Ronon in the tax practice. “IRS and Treasury have shown that they want to coordinate with the SEC when implementing reform,” he says. For example, Scarpa adds, the IRS and Treasury issued rules to ease tax compliance with the SEC’s 2014 reform.

To read the entire article, click here (subscription required.)

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